How Medicare Advantage Payments are Changing

April 02, 2024

CMS has issued a new proposal that affects payment rates for next year’s Medicare Advantage (MA) plans.

In an announcement Monday, the federal agency said the CY 2025 Rate Announcement would increase government payments to MA plans on average by 3.70 percent, or about $16 billion, from 2024 to 2025. The announcement follows an initial proposal that was released by the Biden administration during January.

“The Rate Announcement finalizes annual updates to MA payment growth rates and changes to the MA and Part D payment methodologies to improve payment accuracy,” the agency said in a statement.

Here’s what you need to know:

• Notable:  The administration continues the phase-in of the MA risk adjustment model that was first implemented in 2024, as well as “continued phase-in of updates to the calculation of growth rates related to medical education costs, as well as other technical improvements.”
• Background:  About half of Medicare beneficiaries are enrolled in an MA plan. These beneficiaries accounted for about 54 percent of Medicare spending on net premiums, per the Kaiser Family Foundation.
• By the numbers:  The federal government is projected to pay between $500 and $600 billion in Medicare Advantage payments to private health plans in 2025.
• Payor reaction:  While health-related risk adjustments will result in an overall increase in payments, several national payor groups expressed concerns that the administration’s changes would decrease the MA benchmark payment rate by 0.16 percent.

The finalized rate announcement and a fact sheet are available online.